Digital Assets Licensing under Copyright Law in India

Introduction : Digital assets have changed how creative works are created, distributed, authenticated and monetised. Digital art, music, photographs, films, software, virtual goods and collectibles can now be represented through blockchain-based tokens and traded through online platforms. The most prominent example is the non-fungible token, or NFT.

An NFT is a unique blockchain-recorded token associated with an asset or work. It may contain or refer to an image, audio file, video, software code, collectible or physical item. Its principal function is usually to establish the identity and transaction history of the token. It does not, by itself, determine who owns the copyright in the underlying work.

This distinction is the foundation of digital-asset licensing in India. A person may purchase an NFT and obtain control of the token recorded on the blockchain, but that does not automatically confer the rights to reproduce, communicate, adapt, distribute or commercially exploit the underlying work. Those rights remain governed by the Copyright Act 1957 and must be assigned or licensed in accordance with the Act.

What Is Being Licensed?

A digital-asset transaction may involve several separate objects. Firstly, the token itself. The token is a blockchain entry linked to a wallet address and identified through a unique cryptographic reference. The buyer may obtain the right to transfer that token under the rules of the relevant blockchain and marketplace.

Subsequently, he underlying digital work. This may be a painting, photograph, song, video, animation, graphic, literary work, software programme or game asset. The work may qualify for copyright protection independently of the token.

The third is the metadata. Metadata may identify the creator, title, edition, token number, file location, royalty instructions or licensing conditions. Some metadata may be protected as part of a database or literary work if the originality threshold is met, but not every factual field automatically attracts copyright.

The fourth is the smart contract. A smart contract is code that executes defined actions on a blockchain, such as transferring a token or calculating a payment on resale. The code may be protected as a computer programme under copyright law, although the contractual effect of the code depends on the surrounding agreement and applicable contract law.

The fifth is the platform service. The marketplace may provide hosting, wallet integration, search, display, payment processing and resale facilities. Its terms may grant users only limited rights to display or access the underlying work.

These components may belong to different parties. The artist may own the work, the marketplace may own its platform and code, and a collector may own the token. Treating them as one undivided asset is the primary source of licensing confusion.

Copyright Protection in India

The Copyright Act protects original literary, dramatic, musical and artistic works, cinematograph films and sound recordings. Copyright generally arises when an original work is created in a material form. Registration is not a prerequisite to protection, although registration and creation records may assist in proving ownership. 

Section 14 sets out the exclusive rights associated with copyright. Depending on the category of work, these include reproduction, issuing copies, communication to the public, adaptation, translation, storage and commercial rental. If an NFT contains or links to a protected work, minting it may involve reproduction or communication to the public. Selling it may involve further communication, distribution or commercial exploitation. 

Section 51 provides that copyright is infringed when a person, without a licence from the owner or in violation of licence conditions, does anything that the Copyright Act gives exclusively to the copyright owner. Therefore, unauthorised minting is not lawful simply because the transaction occurs through a decentralised network. Blockchain technology may change how the transaction is recorded, but it does not eliminate the underlying exclusive rights. 

The person minting an NFT must establish authority to do so. A purchaser, marketplace operator or platform cannot assume that possession of a digital file proves ownership of the copyright. A downloaded image, publicly accessible song or widely shared video may still belong to another person.

Ownership of the Token and Copyright

The most important legal distinction is between ownership of the token and ownership of the underlying copyright. The token may be transferred through a blockchain transaction, while the copyright remains with the creator.

An NFT sale may therefore provide only limited rights, unless the agreement provides otherwise, these rights should not be read as permission to reproduce the work on merchandise, use it in advertising, create derivative works, license it to third parties or exploit it commercially. A collector who buys an NFT linked to a digital painting cannot ordinarily print thousands of copies of that painting or use it as a brand without the copyright owner’s permission.

Indian law imposes formal requirements for copyright assignments. Section 19 requires an assignment to be in writing and signed by the assignor or an authorised agent. The assignment must identify the work and specify the rights assigned, the duration and territorial extent of the assignment, and the amount of royalty or consideration payable. If the period is not stated, the law provides a default period of five years. If the territory is not specified, the assignment is presumed to extend within India. 

These requirements are difficult to satisfy through a token transfer alone. A smart contract may record terms on a blockchain, but parties should use a clearly drafted written instrument identifying the copyright rights being transferred or licensed. The token transaction can then serve as evidence of the commercial transfer while the written agreement supplies the copyright terms.

Licensing Models

The first model is a display licence. The buyer receives a non-exclusive, personal, worldwide right to display the work in a digital wallet, gallery or approved platform. The buyer may not reproduce, modify, distribute or commercialise the work.

The second is a commercial-use licence. The buyer may use the work in advertising, merchandise, social-media campaigns, games or other commercial activities. The licence should define media, territory, duration, permitted adaptations, attribution and approval rights.

The third is a full copyright assignment. The creator transfers specified copyright rights to the buyer. This is more extensive and must comply with Section 19. A full assignment should not be assumed merely because the token is marketed as an exclusive or “one-of-one” asset.

The fourth is a limited minting licence. An artist may authorise a platform to create and sell NFTs linked to the artist’s work while retaining copyright. The platform may receive a right to reproduce the work for minting, display and marketing, but not to exploit it beyond the agreed channels.

The fifth is a token-gated access licence. Ownership of the token gives access to exclusive content, software, events or communities. The contract should clarify whether the access right ends when the token is resold and whether the content may be downloaded or shared.

Each model allocates different rights. The licence should therefore use operational language rather than marketing terms such as “ownership,” “exclusive,” “commercial rights” or “full access” without defining their legal meaning.

Infringement Risks

Unauthorised minting is the most obvious risk. A person may copy an artist’s work, create a token and sell it without the artist’s permission. This may infringe reproduction, communication and distribution rights. It may also involve passing off, personality-rights violations or trademark infringement where a celebrity, brand or character is used.

A second risk concerns derivative works. A person may take a copyrighted photograph, alter it and create an NFT. The alteration may still infringe the copyright owner’s adaptation rights unless authorised.

A third risk involves platform display. Even if the token itself is lawfully minted, the marketplace may reproduce or communicate the work to advertise the sale. The platform should obtain the necessary licence from the creator or ensure that its user terms provide an enforceable authorisation.

A fourth risk concerns false provenance. Blockchain records show that a wallet minted or transferred a token, but they do not prove that the minter was the copyright owner. A token can permanently record an unauthorised claim. Marketplaces should therefore conduct creator verification, rights checks and notice-and-takedown procedures.

A fifth risk concerns resale royalties. Smart contracts may direct a percentage of resale proceeds to a creator, but royalty collection depends on whether the resale occurs on a compatible platform and whether the transaction is technically visible. A contractual royalty obligation may need to supplement the automated mechanism.

Platform and Marketplace Responsibilities

Marketplaces occupy a central position because they control listing, display, payment and discovery. Their terms should specify whether the platform receives a licence to host and promote the underlying work and whether sellers warrant that they own or control the relevant rights.

Platforms should maintain procedures for dealing with claims. These may include temporary delisting, preservation of transaction records, notice to the seller, counter-notice mechanisms and permanent removal where infringement is established. A platform that ignores repeated infringement may face greater legal and reputational exposure than one that responds promptly and transparently.

The platform should also distinguish between technical custody and legal ownership. Holding a token in a wallet does not make the platform the owner of the underlying copyright. Its terms should avoid language that accidentally transfers rights or creates consumer expectations inconsistent with the actual transaction.

Tax and Regulatory Context

NFTs may fall within India’s definition of virtual digital assets for tax purposes. Section 2(47A) of the Income-tax Act 1961 includes non-fungible tokens within the definition of virtual digital assets, subject to statutory and notified conditions. This classification concerns taxation and does not determine copyright ownership or licensing rights. 

The sale of an NFT may also involve contractual, consumer-protection and anti-money-laundering issues depending on the parties, platform and transaction structure. A copyright licence should not be treated as a substitute for compliance with other applicable laws.

The absence of dedicated NFT legislation means that businesses should avoid assuming that a token is legally equivalent to a title deed, share, copyright certificate or ownership certificate. Its legal effect depends on the contract, the underlying asset and the laws applicable to the transaction.

Conclusion

Indian copyright law can govern digital-asset licensing even though it does not expressly regulate NFTs. The Copyright Act protects the underlying work, while contract law determines what rights are transferred or licensed alongside the token. Section 19 makes written and specific copyright assignments especially important.

Buying an NFT normally transfers the token, not the copyright. Commercial reproduction, licensing, merchandising, adaptation and public communication require express permission unless an applicable statutory exception applies. Smart contracts can automate transactions and royalties, but they should operate alongside a written legal agreement that defines ownership, permitted uses, retained rights and remedies.

The future of digital-asset licensing in India will depend on legal clarity and contractual discipline. Blockchain can authenticate transactions, but only copyright law and properly drafted agreements can determine whether the person making the transaction had the authority to exploit the underlying creative work.

Author:- Amrita Pradhan, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or   IP & Legal Filing.

References

1. Copyright Act, 1957, Section 2(y).
2. Copyright Act, 1957, Section(s) 13 and 14.
3. Copyright Act, 1957, Section 51.
4. Copyright Act, 1957, Section 19.
5. Income-tax Act, 1961, Section 2(47A).
6. Copyright Act, 1957, Section 30.
7. Copyright Act 1957, Section 30A.
8. Copyright Act 1957, Section 18.
9. Eastern Book Company v. DB Modak, (2008) 1 SCC 1.
10. R G Anand v. Deluxe Films, (1978) 4 SCC 118.
11. Super Cassettes Industries Ltd v. YouTube LLC, 2012 SCC OnLine Del 2737.
12. Nishith Desai Associates, Tracking NFTs from Code to Court: Legal Considerations and Disputes (February 2024) https://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/Tracking-NFTs-from-Code-to-Court.pdf